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U.S. Senate Introduces Bill Creating VC Program to Stimulate Investment in Small Businesses

To stimulate equity investment in America’s small businesses and create jobs, the U.S. Senate introduced last week the Small Business Investment and Growth Act of 2005. The legislation creates a new venture capital program within the Small Business Investment Company (SBIC) program administered by the Small Business Administration (SBA), according to the Committee on Small Business and Entrepreneurship.

Senator Olympia Snowe (R-ME), co-sponsor of the bill, said in a press release that the legislation will ensure that entrepreneurs have access to venture capital and credit markets so they can continue to drive America’s economic growth and job creation. She also noted that recent studies have shown the SBIC program provides essential equity capital to small businesses that would otherwise not be able to obtain financing on equivalent terms.

SBICs are privately-owned and managed venture capital investment companies that are licensed and regulated by the SBA and use their own capital, combined with funds from other private investors, to make equity and debt investments in qualifying small businesses. Sen. Kit Bond (R-MO), co-sponsor of the bill, said the SBIC program serves a dual purpose, creating investment opportunities and providing access to capital to help small businesses expand and grow.

Under the legislation, the SBA will receive a greater share of the profits of SBICs and its authority to declare that an SBIC has defaulted on its repayment obligations will be more clearly established.

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